President Trump was right about Microsoft — but he only leaked part of the story.
Microsoft is changing its approach to building massive data centers for artificial intelligence, unveiling what it calls a “community first” initiative in response to growing opposition from people across the country facing higher electricity bills and dwindling water supplies.
The new plan, announced Tuesday morning in Washington, D.C, includes pledges to pay the company’s full power costs, reject local property tax breaks, replenish more water than it uses, train local workers, and invest in AI education and community programs.
“This sector worked one way in the past, and needs to work in some different ways going forward,” said Brad Smith, Microsoft president and vice chair, in an interview with GeekWire. He later described the shift as “both the right thing to do and the smart thing to do.”
Trump made headlines Monday night with a Truth Social post in advance of the news, saying his administration has been working with tech companies “to secure their commitment to the American People.” He called Microsoft “first up” and said it would “make major changes … to ensure that Americans don’t ‘pick up the tab’ for their POWER consumption.”
Backlash against AI expansion
Microsoft’s rollout comes at a critical juncture for tech.
Amazon, Google, OpenAI, Microsoft and others are betting hundreds of billions of dollars on AI, but those ambitions hinge on their ability to build out the infrastructure to support them — a prospect that depends increasingly on the cooperation of local communities that have grown skeptical of the costs and tradeoffs.
Smith said Microsoft has been developing its initiative since September. He described it as a response to shifting public sentiment — which he witnessed firsthand during visits to his home state of Wisconsin for Microsoft’s data center expansion. Back in 2024, local residents wanted to talk about jobs. By last October, the big topics were electricity prices and water use.
“We saw this catch fire, to a degree, for many other companies in many other places around the country as each month unfolded,” he said.
In data‑center hubs such as Virginia, Illinois and Ohio, residential power prices jumped 12–16% over the past year — noticeably faster than the U.S. average, according to U.S. government data — as grid operators scrambled to add capacity for large new facilities.
The issue has drawn scrutiny on Capitol Hill. Last month, three Democratic senators launched an investigation into whether tech giants are raising residential power bills, sending letters to Amazon, Microsoft, Google and Meta. An Amazon-funded study found that the company more than covers the utility costs associated with its electricity use in some regions
Microsoft’s change of course
Microsoft’s new approach, as outlined in a post by Smith, is a clear departure from its own past practices. The company has accepted tax abatements for data centers in states including Ohio and Iowa, and its identity was kept under wraps in a Michigan township until recently.
In the interview, Smith promised new levels of transparency.
He acknowledged that the traditional approach in the industry was for companies to buy land under nondisclosure agreements to avoid driving up prices — giving them a competitive edge but leaving communities in the dark about who was moving in and how they would operate.
“That is clearly not the path that’s going to take us forward,” he said. The companies that succeed with data centers in the long run, he added, “will be the companies that have a strong and healthy relationship with local communities.”
Asked if Microsoft hopes to inspire or compel others to follow suit, Smith stopped short of positioning Microsoft as the sole leader, crediting Amazon for “really good and well-executed work in this space” while adding that “the industry is going to need to set a higher bar for itself.”
Microsoft’s plan starts by addressing the electricity issue, pledging to work with utilities and regulators to ensure its electricity costs aren’t passed on to residential customers. Smith cited a new “Very Large Customers” rate structure in Wisconsin as a model, where data centers pay the full cost of the power they use, including grid upgrades required to support them.
The company’s other commitments include:
- A 40% improvement in water efficiency by 2030, plus a pledge to replenish more water than it uses in each district where it operates. (Microsoft cited a recent $25 million investment in water and sewer upgrades in Leesburg, Va., as an example.)
- A new partnership with North America’s Building Trades Unions for apprenticeship programs, and expansion of its Datacenter Academy for operations training.
- Full payment of local property taxes, with no requests for municipal tax breaks.
- AI training through schools, libraries, and chambers of commerce, plus new Community Advisory Boards at major data center sites.
Record spending on AI infrastructure
Microsoft did not say how much it plans to spend on these new initiatives, separate from its broader capital expenditures, which approached $35 billion in its first fiscal quarter.
Asked if the company would truly be able to follow through on all of these commitments, Smith said, “we have to follow through.” Internally, he said, Microsoft is “bringing some groups together” and “adding resources” to execute the plan, describing it as essential to the company’s long-term business strategy.
As for how Microsoft’s position squares with OpenAI’s push for federal incentives to support large-scale AI infrastructure projects, Smith drew a distinction. He said he supports federal help with permitting and land access, but not electricity subsidies.
“When it comes to things like electricity prices, when it comes to the water system, when it comes to training for local jobs, these are local issues,” he said.
Smith’s post references the Trump administration’s AI Action Plan and pledges to work with the Department of Labor on workforce programs. Microsoft says it will announce specific community partnerships during the first week of July, timed to America’s 250th anniversary.
